How do you draft a buy-sell agreement for an LLC with multiple members?

1 Choose a trigger event

A trigger event is a situation that activates the buy-sell agreement and gives one or more members the right or obligation to buy or sell their shares. Common trigger events include death, disability, retirement, resignation, expulsion, bankruptcy, divorce, or deadlock. You should decide which events you want to include in your agreement and how they will affect the valuation and transfer of the shares.

3 Select a funding source

A funding source is a means to pay for the purchase of the shares in case of a trigger event. You can use different sources, such as cash, installment payments, loans, insurance policies, or a combination of them. You should choose a source that is feasible and affordable for the buyer and the seller. You should also consider the tax implications and the liquidity of the source.

4 Define the terms of the sale

The terms of the sale are the conditions and procedures that govern the transfer of the shares in case of a trigger event. You should specify who has the first option to buy or sell, how to notify the other parties, how to resolve any disputes, and how to handle any restrictions or obligations. You should also include any clauses that protect the interests of the remaining members, such as non-compete, confidentiality, or indemnification.

5 Review the legal requirements

The legal requirements are the rules and regulations that apply to the buy-sell agreement and the LLC. You should check the state laws, the operating agreement, and any other contracts that affect the ownership and operation of the LLC. You should also consult a lawyer, an accountant, and a financial advisor to ensure that your agreement complies with the law and meets your goals.

6 Sign and store the agreement

The final step is to sign and store the agreement. You should have all the members sign the agreement and keep a copy for their records. You should also store the original agreement in a safe place, such as a lawyer's office, a bank, or a trusted third party. You should review and update the agreement periodically or whenever there is a significant change in the business or the members.